Mobile broadband's three operator roles

Ovum analysts outline the three roles of future mobile broadband ecosystem and how telcos can strategize for each.

SINGAPORE--With 2G expected to reach end of life in the next two years, the future of mobile broadband will see telcos split into three main roles, with Ovum analysts saying that operators should strategize for each segment.

Speaking at a session held by the research firm Wednesday, David Kennedy, Ovum's research director, said 2G's value to telcos is expected to peak at around 2012. As a result, mobile players will fall broadly into three categories--"smart player" at the top, "smart enabler" as a middle layer, and "lean operator" at the base.

"Smart" and "lean" are Ovum-coined acronyms standing for "services, management, applications, relationships and technology" and "low-cost enablers of agnostic networks", respectively.

Kennedy said smart players are predominantly content players and are user-centric, pointing to Google and Apple as examples. "We can expect more of such players in future," he said.

The second category of smart enablers are middlemen connectivity players between smart players and lean operators, who are infrastructure connectivity owners. Smart enablers either add value to lean operators by way of bundling products over broadband, or help smart players add connectivity to their content offerings.

While operators are not required to stick strictly to each of the three roles and may straddle more than one, most are expected to add the middleman smart enabler role to their portfolios, said Nigel Pugh, Ovum's consulting director for Australia and New Zealand.

Pugh advised operators to strategize their plans for each of the three roles so they could better fit into the future mobile broadband ecosystem.

At the bottom, users will welcome more fixed price or all-you-can-eat data bundles from lean operators, he said.

This is an easy proposition to sell as mobile speeds rise with technology, but lean operators should watch out for margin erosion caused by heavy users--estimated to be 5 to 10 percent of customers who will use as much as 60 to 90 percent of traffic, he said.

Lean operators will also want to differentiate so as to avoid being vanilla providers, and thus will look to offer some sort of content bundle to users as smart enablers, explained Pugh.

Smart enablers should focus on using their existing assets, such as their extensive customer data, to package better products and engage developers as well, he said.

They should also open APIs (application programming interfaces) to allow third parties to enhance offerings atop their platforms, and invest in supporting a developer ecosystem, he said.

Telcos not a good fit as "smart players"
Right at the top of the pyramid is the "smart player" content provider, but mobile operators are not the best fit for this role, Pugh said. He noted that this space is highly specialized and faces numerous challenges.

One challenge is that customers have come to expect Internet services to be free, ranging from e-mail and instant messaging to VoIP, as well as search and blogging platforms. Exacerbating this is the fact that it is also expensive for mobile operators to provide content because of acquisition costs involved, as well as the lower profit contribution to the business in comparison with providing connectivity, he said.

Operators also face the issue of prioritizing services over their core business. VoIP is an example of a service that would cannibalize voice revenues, and many telcos would be reluctant to affect this area of business, said Pugh.

According to another Ovum presenter at the recent CommunicAsia event held in Singapore, voice will still contribute 47 percent of operator revenues into 2015.

Furthermore, customers are free to switch content providers as they please, making it difficult to retain an audience that a telco may have invested in to cater to, he said.

As a result, pure content players such as Google are a better fit for the role of the smart player, said Pugh.